• Define the purpose of the trust
• Dictate the manner in which the trust will be managed
• List the property that will be placed into the trust
• Define the distribution of principal and income
• Determine the length of the trust

Trust agreements can be relatively simple, or extremely complex. Any trust, whether living or testamentary, has the option of naming a charitable organization such as Purnell School as a beneficiary, and by doing so you may realize significant tax advantages.

Charitable Remainder Trust:

A Charitable Remainder Trust (CRT) is defined by federal law as a recognized gift plan which will allow you to provide income to yourself and others while making a generous gift to a charitable organization such as Purnell School. The income can continue for the lives of the beneficiaries you designate, for a fixed period of time (not to exceed 20 years) or for a combination of both. Upon the termination of the trust, the remaining property in the trust will be used by the charitable organization as designated by the trust agreement; hence the word "Remainder" in Charitable Remainder Trust.

There are many advantages to establishing a CRT (with a minimum amount of $100,000 required) and naming Purnell as a beneficiary; some of which are listed below:

• You (or your beneficiaries) will receive income for life, or for a specified period of time;
• You may receive a substantial charitable income tax deduction
• You may avoid capital gains tax on the transfer of appreciated assets such as real estate or securities
• You may reduce your estate taxes
• You may actually increase your income on low yielding assets
• You will have the opportunity to leave an unrestricted or designated gift for Purnell School

Charitable Remainder Annuity Trust:

A Charitable Remainder Annuity Trust is a trust that pays to the grantor an agreed upon fixed amount, which must be at least five percent (5%) of the fair market value of the assets initially used to fund the trust. This amount does not change, and no additional gifts may be added to the annuity trust after it has been created.

Charitable Remainder Unitrust:

A Charitable Remainder Unitrust is a trust that pays a fixed percentage, at least five percent (5%), of the fair market value of the trusts assets, as valued annually. Since the value of the trust assets can reasonably be expected to change from year to year, the unitrust payments will vary in amount each year. Additional contributions can be made to the unitrust after it has been established.

At least three variations of the unitrust are possible. A "straight" unitrust pays the stipulated amount, even if it is necessary to invade the principal to do so. A "net-income" unitrust pays the lesser of the stipulated amount or the actual net income, so principal would not be invaded. A "net-income with make-up provision" unitrust is like the net income unitrust except that excess earnings can be applied to cover accrued deficiencies resulting from the net income being less than the stipulated amount.

Charitable Lead Trusts:

Charitable Lead Trusts are basically the opposite of a Charitable Remainder Trust. When you establish a Charitable Lead trust (with a minimum amount of $100,000 required), the income or "lead" interest, is paid to a qualified charitable organization, such as Purnell School, and then at the termination of the trust, the "remainder" interest is typically transferred back to you or your non-charitable beneficiaries. The amount paid to the charitable organization during the trust may be either an agreed upon fixed sum (an "annuity trust" interest) or a percentage of trust assets as valued each year (a "unitrust" interest).

Laws pertaining to trusts vary widely, and that you should always consult with your advisors prior to making any changes to your estate plans. Please remember that Purnell School is in no way dispensing legal advice or counsel.